If a monopolist’s demand curve is downward sloping and linear, then its total revenue curve must be a. identical to the demand curve. b. a ray from the origin with a slope equal to price. c. negatively sloped with twice the slope of the demand curve. d. a rising function of output that increases at an increasing rate. e. a rising function of output that increases at a decreasing rate, reaches a maximum, then falls.
ECON 3070 Intermediate Microeconomic Theory.
12. All of the following are true about a monopolist except a. average and marginal revenue are not the same. b. marginal revenue is greater than price. c. marginal revenue is zero if price elasticity of demand equals 1. d. marginal revenue decreases with increases in output. e. marginal revenue can be negative.
13. Suppose that an excise tax is imposed on the monopolist’s product.  If the monopolist’s marginal cost is horizontal in the relevant range, which of the following statements must be true? a. The price will increase by an amount less than the tax. b. The price will increase by an amount equal to the tax. c. The price will increase by an amount greater than the tax. d. The price may either increase or decrease. e. An excise tax will have no effect on the price-output decision of a monopolist.
14. Which of the following is not true? a. A monopolist typically seeks to maximize profits. b. A monopolist sets price as high as possible. c. A monopolist may engage in advertising. d. Monopolists price on the elastic portion of their demand curves. e. Profits are not guaranteed even if the firm is a monopolist.
15. Since entry is barred in a monopoly, in the long run the monopolist will a. do nothing since entry will not force an adjustment. b. adjust output but leave the price at the short run profit maximizing level. c. adjust price but leave the output at the short run profit maximizing level. d. adjust both price and output levels to reflect long run scale of plant adjustments. e. set price equal to long run average costs.
16. The cost curves associated with monopolists are a. always different from those faced by perfectly competitive firms. b. always lower than those faced by competitive firms. c. always higher than those faced by competitive firms. d. always L-shaped rather than U-shaped. e. typically have no relationship to the selling side of the market.
17. If a monopolist had no costs, the best possible price would be where demand is a. infinitely elastic. b. relatively (but not perfectly) elastic. c. unit elastic. d. relatively (but not completely) inelastic. e. completely inelastic.
18. If a monopolist has only fixed costs and chooses that output at which marginal cost equals price, it will a. earn positive economic profits. b. earn zero economic profits. c. incur a loss equal to its variable costs. d. incur a loss equal to its fixed costs. e. cannot tell from the information given.
ECON 3070 Intermediate Microeconomic Theory.
19. If the monopolist maximizes profits when marginal revenue equals marginal cost equals average cost, economic profits must be a. negative. b. positive. c. zero. d. either (a) or (c). e. cannot tell from the information given.
20. A monopolist will discontinue production if a. marginal revenue is less than marginal cost. b. marginal revenue is less than average total cost. c. marginal revenue is less than average fixed cost. d. price is less than average total cost. e. price is less than average variable cost.